The Union Budget 2022 is a visionary Budget with a 25-year outlook. It continues the momentum of the 2021 Budget with steadfast focus on infrastructure building, infrastructure financing, manufacturing and productivity enhancement using technology and digital outreach, as the growth engines of the economy.
The focus is on building logistics, mobility and connectivity of goods and people through the PM GatiShakti National Master Plan. Within mobility, the focus is on clean and sustainable mobility with a battery swapping policy and formulation of interoperability standards for EVs. The auction of 5G spectrums in 2022, followed by a rollout of 5G services in 2022-23 will enhance connectivity and provide employment opportunities.
The 25,000 kms of highways, launch of the Unified Logistics Interface Platform, four multimodal logistics parks through PPP mode, 100 multimodal cargo terminals and 400 new Vande Bharat trains coupled with an infrastructure focused skill upgradation project to improve implementation, are all steps in the right direction. Capex outlay for 2022-23 rises by 35.4% to 7.5 trillion (2.9% of GDP) leading to an incremental outlay of2 trillion.
Technology and digital infra will be a key enabler with the launch of e-Passports, ULIP, DESH-Stack, interlinking multiple portals, Kisan drones, expansion of PM eVIDYA programme, virtual labs in science and mathematics, a multilingual Digital University, health ecosystems, etc. There have been steps to support the MSME sector by way of extension of ECLGS scheme till March 2023 and expansion of the guarantee cover by 50,000 crore to5 lakh crore. Savers may have another fixed income investment option in the form of Green Bonds. The Reserve Bank of India will be introducing the Digital Rupee using blockchain and other technologies in 2022-23.
The overall expenditure for FY23 is pegged at 39.45 trillion, up 13% as compared to FY22BE while total receipts excluding borrowings are estimated at22.84 trillion. Revenue estimates look conservative and can surprise on upside just like they did in FY22. FY23 fiscal deficit is pegged at 6.4%, down 50 bps from the revised estimate of 6.9% in FY22. Nominal GDP growth estimates are conservative at 11% for FY23. With inflation being where it is and economy being in a cyclical upturn, we can have a pleasant surprise here too, which will mean that fiscal deficit as a percentage of GDP is lower than the estimated 6.4%.
This has been a single-mindedly growth focused budget and probably inflationary too. It got a big thumbs up from the equity markets as key indices ended up by almost 1-1.5%. Bond markets had reasons to be upset. 10-year G-Sec yield rose 0.15% to 6.83%. 2-year and 3-year G-Sec yields rose the sharpest by 0.43% and 0.47% respectively. The rupee fell marginally against the US dollar to 74.8 levels.
We believe that interest rates will continue to be under pressure from rising inflation fears and a larger government borrowing plan. Market linked fixed income instruments may face MTM losses while non-market linked instruments like small savings schemes, bonds, fixed deposits, etc., should start providing better returns to the saver. Equity investors have reasons to celebrate though as the economy seems to be firmly on the path of a strong cyclical expansion for years to come.
The author is Chairman & MD, Bajaj Capital. Views are personal.